Making the Most of Your Regret: A Behavioral Investigation of Workers’ Relocation in On-Demand Platforms

Jiang, Z-Z, G Kong, Y Zhang. 2020. Making the Most of Your Regret: A Behavioral Investigation of Workers’ Relocation in On-Demand Platforms. Manufacturing & Service Operations Management, to appear

42 Pages Posted: 19 Aug 2018 Last revised: 1 Jul 2020

See all articles by Zhong-Zhong Jiang

Zhong-Zhong Jiang

Northeastern University - School of Business Administration, Department of Information Management and Decision Sciences

Guangwen Kong

Temple University-Fox School of Business

Yinghao Zhang

University of Cincinnati

Date Written: May 30, 2020

Abstract

Problem Definition: We have witnessed a rapid rise of on-demand platforms, such as Uber, in the past few years. While these platforms allow workers to choose their own working hours, they have limited leverage in maintaining the availability of workers within a region. As such, platforms often implement various policies, including offering financial incentives and/or communicating customer demand to workers in order to direct more workers to regions with shortage in supply. This research examines how behavioral biases such as regret aversion may influence workers' relocation decisions and ultimately the system performance.

Academic/Practical Relevance: Studies on on-demand platforms often assume that workers are rational agents who make optimal decisions. Our research investigates workers' relocation decisions from a behavioral perspective. A deeper understanding of workers' behavioral biases and their causes will help on-demand platforms design appropriate policies to increase their own profit, worker surplus, and the overall efficiency of matching supply with demand. \newline

Methodology: We use a combination of behavioral modeling and controlled lab experiments. We develop analytical models that incorporate regret aversion to produce theoretical predictions, which are then tested and verified via a series of controlled lab experiments.

Results: We find that regret aversion plays an important role in workers' relocation decisions. Regret averse workers are more willing to relocate to the supply-shortage zone than rational workers. This increased relocation behavior, however, is not sufficient to translate to a better system performance. Platform interventions, such as demand information sharing and dynamic wage bonus, can help further improve the system. We find that workers' regret-aversion behavior may lead to an increased profit for the platform, a higher surplus for the workers, and an improved demand-supply matching efficiency, thus benefiting the entire on-demand system.

Managerial Implications: Our research emphasizes the importance and necessity of incorporating workers' behavioral biases such as regret aversion into the policy design of on-demand platforms. Policies without considering the behavioral aspect of workers' decisions may lead to lost profit for the platform and reduced welfare for workers and customers, which may ultimately hurt the on-demand business.

Keywords: Behavioral Operations; Experiments; Incentives and Contracting; Operations Strategy, Service Operations

Suggested Citation

Jiang, Zhong-Zhong and Kong, Guangwen and Zhang, Yinghao, Making the Most of Your Regret: A Behavioral Investigation of Workers’ Relocation in On-Demand Platforms (May 30, 2020). Jiang, Z-Z, G Kong, Y Zhang. 2020. Making the Most of Your Regret: A Behavioral Investigation of Workers’ Relocation in On-Demand Platforms. Manufacturing & Service Operations Management, to appear, Available at SSRN: https://ssrn.com/abstract=3226727 or http://dx.doi.org/10.2139/ssrn.3226727

Zhong-Zhong Jiang

Northeastern University - School of Business Administration, Department of Information Management and Decision Sciences ( email )

Shenyang, Liaoning
China

Guangwen Kong (Contact Author)

Temple University-Fox School of Business ( email )

531 Alter Hall
1801 Liacouras Walk
Philadephia, PA 19122
United States
19122 (Fax)

HOME PAGE: http://https://www.fox.temple.edu/about-fox/directory/guangwen-kong/

Yinghao Zhang

University of Cincinnati ( email )

2529 Campus Green Dr.
Cincinnati, OH 45221
United States

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